However, the research house said the 25 basis points (bps) hike in the overnight policy rate (OPR) likely weighed on the sector, as household and business loans saw lower sequential growth.
“Lumpy applications pre-Hari Raya could also be a dampener for the month.
“Going forward, we anticipate slower household numbers but expect total industry growth to be lifted by a higher business portfolio as the border reopening and a more vibrant economic environment could fuel working capital and expansionary needs,” it said in a research note.
It noted that gross impaired loans (GIL) has returned to 1.64% but is unconcerned as it is an indication of the normalisation of loan profile from the lapse in repayment assistance programmes.
Kenanga also highlighted that Malaysian bank deposits continued to grow, with 6.6% growth year-on-year (y-o-y) but saw a decline in the current account savings account (CASA) mix, possibly from some migration to term deposits post-rate hike.
The research house also anticipated three additional 25 bps hikes during Bank Negara Malaysia (BNM) meetings in July, September and November as tighter monetary policies may be needed to curb inflationary pressures.
“We maintain our ‘overweight’ call on the sector and lean towards high dividend stocks for shelter amid recession-pulled sentiment.
“Maybank is our favourite pick as the dividend champion (7% to 8%) while Affin Bank is noteworthy for its strengthening fundamentals and possible special dividend payments from the upcoming disposal of its asset management and insurance units,” it added.
RHB Research has also maintained an “overweight” stance on the banking sector as the effect of the surprise 25 bps OPR hike on May 11 was reflected in BNM’s latest statistics.
The research house noted that fixed deposit rates rose by over 20 bps, while the average lending rate added 12 bps month-on-month to land at 3.68% at end-May.
However, it said loan growth remained stable at 5% y-o-y, while deposits rose by 7.8%.
“We tweak our 2022 system loans growth forecast to 5.1% from 5.2%, after factoring in the year-to-date performance. Our top picks are Hong Leong Bank, AMMB and Maybank,” it shared.